Mesa reaping cash as it sells Pinal County farmland to pay for stadium

Mesa is reaping the ultimate cash crop from its Pinal County farmland: cash.

The city closed last week on the first part of a three-phase deal that could produce $135 million in purchase and lease payments over the next 5 1/2 years.

Farm Sources International, a London company with North American headquarters in Scottsdale, is buying the property through a recently created affiliate called Pinal Land Holdings LLC.

The first check, for more than $20 million, landed in Mesa’s bank account on New Year’s Eve.

“It’s great to deposit a check of that size and see it actually come to fruition,” Mayor Scott Smith said.

For Mesa, it’s the serendipitous end of a nearly 30-year saga involving Arizona’s fragile water supply, global food shortages and the Chicago Cubs.

Spurred by a 1980 state law that required cities to prove they had enough water for future growth, Mesa paid nearly $30 million for almost 12,000 acres of Pinal farmland in 1985.

Owning its water rights would allow Mesa to pull up to 30,000 acre-feet a year from the Central Arizona Project canal — enough to supply 60,000 homes. Using farmland water, the city then would pump an equal amount back into the canal as it traversed Pinal County en route to Tucson.

Over the years, however, Mesa developed other sources of water, and the city netted only about $200,000 a year from leases to farmers who continued to work the land. Some people began to advocate selling the land as a way of shoring up Mesa’s chronically fragile finances.

In 2007 — at the height of the last real-estate boom — Mesa hired Scottsdale broker Nathan & Associates to market the land, hoping to rake in as much as $300 million.

A few relatively small tracts sold during the recession, leaving about 11,400 acres in several parcels between Coolidge and Eloy.

Meanwhile, in 2010, the Legislature killed Mesa’s bid for new regional taxes to build a Chicago Cubs spring-training stadium. That threatened Mesa’s relationship with one of the Cactus League’s iconic teams, which was considering a move to Florida.

Mesa then said it would pay for the stadium on its own: $84 million for baseball facilities and $15 million for related infrastructure, including a rebuild of Riverview Park next to the stadium. Construction is nearly finished.

Mesa said it would issue bonds for the project and pay for them from future Pinal County land sales. But it wasn’t clear four years ago what the backup plan would be if the land didn’t sell.

Farm Sources International rode to Mesa’s rescue in early 2012 with an offer to buy all 11,400 acres. With global food supplies tight and the prices of commodities soaring, the company saw a future in continuing to farm the land.

Mesa’s City Council approved the deal in May 2012, expecting it to close in 2013. City Manager Chris Brady has said all along the sale was on track but due diligence for scattered parcels across multiple political and utility jurisdictions proved immensely complicated.

The check Mesa received last week seals the purchase of 1,626 acres.

FSI will lease the rest with two options to purchase them in installments of 2,367 and 7,450 acres. The final option would be exercised by mid-2019. The $135 million total would be a combination of lease and purchase payments; the purchase price averages $10,000 per acre.

Brady is confident FSI will follow through on the purchase options. “They sound like they have every intention of continuing,” he said.

Jackob Andersen, FSI chief executive officer, did not respond to a request for comment. He said in a news release that the farmland’s “existing infrastructure, the current and planned transportation access and the existing sense of community born through its agricultural heritage” influenced the decision to purchase.

In addition to paying for the Cubs stadium, Mesa will use the money for renovations at Hohokam Stadium and Fitch Park to accommodate the Oakland Athletics, who move their training operations to Mesa in 2015. Mesa’s agreement with the A’s caps city spending for that work at $17.5 million.

Money from the Pinal deal also will cover renovations that turned two downtown city buildings into college campuses and go toward other economic-development projects.

That comports with Mesa’s stipulation in 1985 that if the land were ever sold, the proceeds would fund capital projects, not operating expenses.

Nathan & Associates is receiving a 3 percent commission from the sale.

The firm also brokered what is believed to be the costliest real- estate transaction in Mesa history, a $265 million deal in 2006 that saw Scottsdale-based DMB Associates buy 5 square miles of the former General Motors Desert Proving Ground.

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